Current methods of accessing a storage location of valuable objects primarily requires physical presence for security measures or for a person bringing a physical key that is required for opening the storage location. Besides a key other opening methods are known such as biometric methods and electronic methods such as entering a password at a keyboard. Current systems primarily require that such an action is occurring in person at such a location. Furthermore, in the direct vicinity of such a storage location performing parts of a trade is not allowed or the space is not equipped for this purpose. Access is also restricted in time.
An example is when accessing the area where one has rented a safe deposit box at a bank. Security measures enable only access to a small number of people to that area and potentially only to people who are related to a certain safe deposit box or something functionally alike and also related to that area. Thus either a receiver or a provider is allowed to enter that area and it is not common practice for them to do so both at the same time. A physical transferring of valuable stored objects in the traditional way cannot take place at that area since a receiver and a provider are not allowed to be present at the same time at that area. Besides access, such institutions are not equipped for validation or verification of the object as will be described later on. This is because there is no standardization on what objects are allowed to be in a safe deposit box. Current systems place responsibility of the contents of the box solely on the renter of that safe deposit box. Another problem exists when the change of ownership comprises one or more valuable objects having a large volume or may required specialized handling: that area is not equipped for those purposes. In most cases such access is also limited in duration and is not always possible. This may be the case when a bank is closed or access is provided on certain days or at certain times. In some cases an appointment needs to be made in case the bank protocol prescribes an employee to be present or to be performing certain actions. This may be the case since the area may provide access to storage locations of others that also may contain valuable objects; in that case only controlled or supervised access is allowed. This is mainly due to a form of risk management. In case of a depot at a bank for storing standardized forms of precious metals: a bank employee places items in the depot. Extraction of the items also occurs by a bank employee before the renter or owner, or the person having a proper power of attorney can get their hands on the items for making a trade at another location.
Thus administrative procedures, limited opening times of a bank, limited times for allowing a depot or safe deposit box to be accessed, mandatory reservations ahead of time for extracting or storing precious metals in a bank depot, physical restrictions (one may need to go to such a facility for providing a kind of key) are all problems amongst others which limits a renter of such spaces in their freedom to make a transaction that for instance involve the objects stored in such a safe deposit box. Due to a decreasing number of actual branches of a bank or changing locations of these branches or due to termination of their safe deposit renting service by banks or at bank branches, the ability to rent a safe deposit box at banks has diminished. This even increases the problem: the travel distances to a marketplace for an object and for the parties involved grow.
These and other mentioned aspects may be applicable to all known kinds of secure storage areas or locations for storing valuable objects. The above mentioned problems or situations may also at least in part be problems of other known facilities providing storage for valuable objects or be part of a combination thereof.
Since the history of man, people use various objects for trading or for bartering. For payment and clearing debts, objects and material like salt, tulip bulbs, mirrors, seashells and beads were used. These objects thus represent units of value, act as a means for exchange, are used to store value or to transfer value, or are used as a standard of deferred payment. An example of such a payment standard is ‘fiat currency’, which derives its value from government regulation or law. Another example of a payment standard is the ‘gold standard’. This is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold; a kind alike system based upon a (valuable) material is a ‘silver standard’. Various other standards or backings of a currency are possible and may be implemented in the future, for example by using ‘rare’ earth materials. All these units of value depend on trust: What do people consider to be of value, how does that attribute to these backings or standards of value, how are they regulated and used, and are these backings of value exchangeable. Money may fulfil some of these functions at different times, at different places and under certain circumstances. Money may be of a physical form, or it may for a large part be in an electronic form.
Before the electronic form of money, portability of money has for long time been an important aspect of money. Money is based upon the faith or trust by multiple users that this money can be exchanged into other objects of real value in daily life, but which are more bulky. For instance objects like food, clothing, shelter, etc. When examining the history of money, goldsmiths often play an important role. A brief characterization will follow and describe parts of that role.
Goldsmiths made trade easier by making coins of precious metals like silver or gold in standardized units. The weight and purity of these coins were certified. In order to protect the goldsmith's gold, vaults were used. A goldsmith rented space in these vaults that were under the goldsmith's control to others for storing and safeguarding their coins, precious metals and valuable items. Depositors rarely withdrew their actual physical coins or gold from the vaults and when depositors did, they did not withdraw all at the same time. This was because the goldsmith gave depositors a claim or claim check in writing. Such a claim check guaranteed that the holder of such a claim check could get back the deposit that was written in the claim. In turn, this resulted in claim checks being used and exchanged when making an actual trade transaction at for instance a physical market place. The goldsmith was not directly involved in order to make such a trade.
An important change came when the goldsmith loaned the physical available deposits of depositors to borrowers in the form of claim checks. For providing these deposits, depositors in return received a form of interest on their deposits. The loans to the borrowers were priced a higher interest rate in comparison to the interest rate given to the depositors. The difference between the received and the paid interest rate functioned as a compensation for costs and provided profit for the goldsmith. The interest rate that the depositor received may have been a composition that partly related to the profit made because the depositor's deposits was loaned out to borrowers and that partly related to the depositor paying the goldsmith for providing safe storage of the deposits. These parts may have been separate money flows, or the storage part may have been omitted from the composition. A first form of a banking system was thus created.
Another important further change came when the goldsmith or banker issued more loans to borrowers, read issued more claims on gold, than physical counter value deposited in the goldsmith's vaults. Depositors did not know or did not care that there were more loans than the deposits could guarantee, probably as long as they got their interest paid.
This kind of leverage, called ‘fractional reserve banking’, may work until a large number of depositors withdraw their deposits from a bank within a very short period of time: this is called a ‘bank run’. This may occur for various reasons, but mainly this is due to a lack of trust or faith regarding the bank. Also a lack of trust or faith regarding the political or financial climate within one of the countries wherein the bank is operating in may be sufficient reason for a bank run. The bank for instance may have financed companies with loans, and these companies may not be able to return the loan or even not be able to pay the interest. Even a perception or anticipation based on false or incomplete grounds may be sufficient to distrust a bank. The same may hold true for financial products provided by the bank or for loans provided to countries.
Several crises have arisen lately, for example the ‘subprime mortgage crisis’ resulting in a global financial crisis starting in 2008, and the ‘European debt crisis’ wherein countries like Greece and Ireland were hit severely. In these crises, several bank runs have occurred: US firm Countrywide Financial in August 2007, British bank Northern Rock on 13 Sep. 2007, global investment firm Bear Stearns on 11 Mar. 2008, US mortgage lender IndyMac Bank on July 2008, US firm Washington Mutual in September 2008, US bank Wachovia on 26 Sep. 2008, Icelandic bank Landsbanki on 6 Oct. 2008, and in October 2009 DSB Bank in the Netherlands.
Central banks of nations or ‘system banks’ experience more and more difficulties in resolving or preventing (potential) bank runs, since banks and bank clients operate globally instead of only nationally. Additionally, nations may work together under a single currency. A further stop down the road is when countries go bankrupt, called defaulting. This happened for example to post-second-world-war Germany, to Argentina in 1999, and most recently to Cyprus in 2011. The default of a nation or group of nations also affects the currency they use. It has effects on prices of imported or exported goods and services. Financial confidence in banks and in countries has been in decline at least since 2008.
The current use of fiat money has no backing of a physical commodity. Money creation nowadays occurs by banks. They bring new money into the economy or create money as they make out loans: money as debt.
Banks make use of a principle called the ‘leverage principle’. A leverage ratio of 4% for example means that for every 1 item of capital (or unit of value) a bank holds in reserve, the bank can lend 25 items of capital to others ( 1/25=4%). After the start of the global crisis in 2008, there has been a trend towards raising the required leverage ratio for banks. This is specified in the Basel III agreements.
Banks and governments do not guarantee more than a certain amount of deposited money at a bank to a depositor. After the G20 meeting in Brisbane 2014 however, the G20 nations consider the remaining deposit amount to be a paper investment into the bank. Thus a bail-out of a bank by a central bank or a nation became a bail-in of a bank by depositors assets. Such guarantees of a limited deposit amount deposited by banks are part of so-called deposit guarantee schemes.
These deposit guarantee schemes do not take into account the probable lower currency value in comparison to other currencies when a bank defaults. Only the amount in the used currency is guaranteed. It remains to be seen whether these kind of guarantees can be upheld when a global crises of confidence occurs.
In order to lower the risk of being part of a bail-in or of being part of a default of one or more financial system elements, a depositor may take measures for a part of their deposits or for a part of their paper currency. A solution is to exchange part of one's deposits or paper currency into other assets that are not under the control of the bank or that are not part of a monetary system. These assets however remain under the control of a nations law and regulation system. Such an asset or assets may be stored in a kind of safe deposit box at home, or at a bank or at a storage facility providing a secure space or depot. In case of a bank, this does not always guarantee access during a bankruptcy of a bank. Access may for instance be restricted for a longer period of time. In case such an asset is stored at home, the owner may have to deal with several risks for instance burglary, robbery or fire. These risks not only are of importance to the assets, but more importantly to the safety of people in and around the house.
When converting or exchanging deposits or money into assets that are not part of a monetary system, it is desirable that some or all of the principles which are applicable to money will for the large part be maintained or even be enhanced. These principles are for instance: acting as a measure of value, acting as a medium of exchange, acting as a store of value, action as a transfer of value or acting as an accepted method of payment. These principles are preferably applicable to assets outside of the monetary system as well, especially when making a trade wherein at least a part of the ownership or holdership of the subject of the trade changes.
Current safe deposit systems are set up from a perspective of safe storage of valuable objects. In these systems, trading is not an easy option or may not even be possible. These safe deposit systems thus do not contribute in a positive manner and do not apply the principles or preconditions for money that allows money to function.